Figure 26.3 provides a bird’s-eye view of how budget priorities changed in the postwar era. It shows the shares of the federal budget devoted to each of three main purposes (national defense, health including Medicare, and income security including Social Security) from 1960 to the present. The long-run trends are clear. Defense spending fell from more than 50 percent of the budget in 1960 to around 20 percent today. The era of the Vietnam War, the defense buildup under President Ronald Reagan in the 1980s, which we will discuss in more detail later, and the recent increases due to the wars in Afghanistan and Iraq appear as deviations from the long-run trend. The shares devoted to income security and health, however, went in the opposite direction. The behavior of the latter share has been especially dramatic. Spending on health care rose from about 1 percent of the federal budget in 1960 to about 24 percent in 2011. The key moment, which we will consider in more detail later, was the introduction of Medicare and
FIGURE 26.3
Major Categories of Spending in the Federal Budget, 1960-2012
Source: Economic Report of the President, 2012, table B-80.
Medicaid in the mid-1960s. Figure 26.3 also shows how difficult it would be to reduce federal spending without cutting these sacrosanct areas of the budget. In 2011, these three areas of the federal budget accounted for about 80 percent of the federal budget. And some of the remaining areas, such as interest payments on the national debt, would be very hard to reduce. Even very large percentage cuts in “other” spending would mean very small percentage cuts in the federal budget.110
World History
